I'm just saying it's highly unlikely for all of Ulfric's actions to be motivated by a desire to be a martyr. Come on Mage, that "I fight because I must" didn't get to you at all?
No, I don't mean to say all his actions are motivated by that. He does believe in what he is doing, but many of his actions are done for image. Even Galmar gets sick of it at the end of the questline at Castle Dour, when he suggests that you be the one to kill Tullius it he's 'robbing the moment by giving it to the "real" hero'.
To execute every Stormcloak would be to decimate the Eastern Holds population, and take away at least a few legionaires for the next war. You couldn't execute that many people without causing another revolt in the Old Holds.
If they were to renounce the Stormcloaks, it is possible they wouldn't kill them. Laying down their weapons and returning to the fold. The Eastern Holds population would already be slightly decimated after the end of Imperial Victory, given you cut through majority of the Stormcloaks.
They wouldn't just keep them prisoner forever, chances are they'll probably die anyway in jail. Prisons in Tamriel aren't that good and many die in the cells. (Some bodies are still even left in them!). I think being executed would be better than dying in a dark cell from poor health or freezing to death.
Ulfric still has a chance, however slim, of speaking out to the Empire and pointing out the current state of Skyrim. He also, as far as he knows, is saving his men.
They knew they were dead even before they reached Helgen.
Lokir: "Ulfric? The Jarl of Windhelm? You're the leader of the rebellion. But if they've captured you... Oh gods, where are they taking us?"
Ralof: "I don't know where we're going, but Sovngarde awaits."
Ralof: "A Nord's last thoughts should be of home."
Keep in mind as far as revolutions go the Stormcloaks are pretty damn mild. It still is a revolution though, things will get a little extreme, and racial issues will settle down if the Stormcloaks win.
These racial issues are normal, it is the Old Holds. They've always been for Skyrim for the Nords.
Ulfric isn't one to make unnecessary enemies, but right now he doesn't have the time, resources or support to do anything about Windhelm. This is evident when Brunwulf gets up there and he's in the same situation.
Except that the Windhelm issues started when Ulfric became Jarl, years before the rebellion went into full swing. He did nothing when he had the resources, so I doubt he'll do anything when he has them again. It is mentioned his father and his father and so on were better to them.
Ulfric is content to ignore them. Even still, the Dunmer of Windhelm weren't after change right away. They mention that real change takes time, but Brunwulf at least spoke with them and discussed plans.
Ulfric is indeed fighting a rebellion, but he does have Generals. He also has a steward he could use to speak with them about it, they're supposed to run the daily duties of the Hold. Ulfric is focused on Nords, he's a Jarl of the Old Hold. I wouldn't expect anything different, they do not care for non-Nords.
The Old Holds would also end up being influenced by the West, because it's simply unavoidable from how much money they bring in. So after things cool down I'm confident you'll see a more balanced Skyrim.
The Eastern Holds aren't poor. Dawnstar is known for it's rich mines, and it is a port city, Windhelm also has a port and two trading companies stationed there. Riften has hunting for pelts which fetch good prices, and farming thrives in the Rift.
Winterhold I'll grant you is plops poor, but they did rival Solitude before the Great Collapse.
I really think this is Skyrim's one shot at independence. An Imperial victory just kills all nationalism.
Nords bounce back. Skyrim is quite independent, the Holds are independent of each other, and very rarely does the Empire get involved in Skyrim. You can't kill their nationalism, they're a stubborn lot.
Stormcloaks are really a short term solution in the long run, same with the Empire. The Nords have to choose to unite together, conquering one side of Skyrim or the other only keeps them united for a time.
Hammerfell and Cyrodiil were in very similar situations when they signed their treaties. Both devasted, but were facing a devasted army. Cyrodiil essentially fought and won their own resistance when they took back the Imperial City. But the treaties were so drastically different.
The Empire could not continue. The Legions did most of the work, the Redguards didn't do too much until the end. The Empire taking back the Imperial City was hard, very hard. It was a large scale battle against a main army. They weren't doing hit and run, and making Aldmeri rule hell.
Treaties are different because the Empire signed it five years earlier. They couldn't continue the war, the Dominion could. The Redguards fought the Dominion in their lands until they reached a standstill and the Dominion left to recover. By that time the Legions were struggling to bring order back to their lands with all the bandits, gangs, and other groups taking advantage of the lack of Imperial authority.
The Empire could barely maintain order in the peaceful years that followed. Had they continued the war, I doubt they would have ever been able to get order back under control. While the Dominion would just be regaining strength, the Empire would be falling apart due to lack of order.
Kind of what Skyrim is having without the Stormcloaks and Legion fighting. Where you have bandits raiding, rogue wizards doing plops and dangerous creatures getting out of hand.